The minutes from the Sept. 16-17 meeting released on Thursday pointed to a deeply cautious Fed even before subsequent economic data showed a sharp slowdown in hiring by U.S. employers.
“Most” policymakers, according to the minutes, thought the Fed’s first rate hike in a decade should still come this year and that financial market turmoil had not “materially altered” the outlook for the U.S. economy.
“The committee decided that it was prudent to wait for additional information,” the Fed said in the minutes, referring to its policy-setting Federal Open Market Committee.
The Fed surprised much of Wall Street by keeping interest rates unchanged at the September meeting, and many analysts expected the minutes to show the decision was a close call.
However, while some central bankers at the September meeting said the U.S. labor market was at full strength and Richmond Fed President Jeffrey Lacker was ready to hike right then and there, worries about a global economic chill clearly extended throughout the central bank.
But Williams cited the economy’s low, 5.1 percent rate of unemployment and evidence of fast-rising real estate prices in his West Coast district as signs it may be risky to wait much longer to raise rates.
“Given the progress we’ve made and continue to make on our goals, I view the next appropriate step as gradually raising interest rates, most likely starting sometime later this year,” Williams said.
Yields on U.S. government debt rose to a one-week high following the publication of the minutes, while U.S. stocks added to gains.